Vodafone to eye Indian listing if it wins $2.6bn tax battle

Vittorio Colao, chief executive of Vodafone, said the UK-based mobile phone operator would consider listing its Indian business if it won a long-running legal battle with Indian authorities over a $2.6bn tax bill.

Tax authorities in the country have ordered Vodafone to pay $2.5bn in back taxes for its $11bn acquisition of Hutchison Whampoa’s 67 per cent stake in a domestic mobile operator that it completed three years ago.

But in a series of interviews with Indian media, part of an effort to boost the group’s image following the tax case, the Italian-born executive stressed that no tax was overdue, adding that if it lost the case it would re-evaluate its investments in Asia’s third-largest economy.

Mr Colao said: “We can see a future of different ownership structure and will consider around the end of the year whether we would be listing the company.

“I do not know when the listing will take place, but it will bring in another phase of maturity into the company.”

Analysts in Mumbai said Indian investors would be welcome a listing, but many added that they had serious doubts about whether the UK group was serious about a public offering.

One said: “We’d love to see Vodafone listed here. But I think they are using the listing option to put pressure on the government to make sure they don’t mess around with their tax issue”.

Vodafone has argued that no tax is due because the transaction was between two non-Indian companies. India’s Supreme Court is due to hear the case on July 19.

However, in March the Indian tax department initiated penalty proceedings against the mobile operator. The total penalty could end up at double the $2.5bn tax bill, Vodafone said.

Vodafone said this month.“Seeking penalties on a ‘test case’ involving a major infrastructure investor highlights the unpredictable nature of India’s taxation policy.

“This move is only likely to raise further concerns amongst potential investors in India.”

Vodafone said a potential listing would also follow the completion of its $5bn buy-out of Essar Group, which controls a 33 per cent stake in Vodafone Essar, the UK group’s Indian business.

Indian rules bar Vodafone from owning more than 74 per cent. The UK group said it would still be compliant with the regulations after the transaction was completed. Vodafone owns 42 per cent of Vodafone Essar directly and a further 18 per cent indirectly via its Indian partners that do not include Essar.